As companies seek to hire the best and safest employees, they are moving beyond traditional references and using third party screening services to perform background checks on job applicants.

While certain types of background checks have been common or even required for many years – such as criminal background checks of child care workers and searches of Department of Motor Vehicle records for truck drivers – some employers are now completing detailed investigations of all prospective employees, regardless of their potential job responsibilities.

Barry Nadell, an attorney and president of Infolink Screening Services, Inc., in Chatsworth, Calif., recently returned from a conference of companies that perform employment screening services.

“Everyone there was beside themselves about the growth of the business, and more and more companies are expanding their services,” reported Nadell, author of the book “Sleuthing 101, Background Checks and the Law.”

According to Tena Friery, research director of the Privacy Rights Clearinghouse in San Diego, 80 percent of employers do background checks in the hiring process.

As a result, her organization is “seeing an increase in queries from people who have been subjects of [these] checks,” she said.

Glenn G. Patton, a labor and employment attorney in the Atlanta office of Alston & Bird, said that pre-employment screening is a way for employers to avoid lawsuits over negligent hiring and retention.

“We are starting to see negligent hiring tacked on to almost every sex harassment and racial harassment claim,” he said, noting that screening can also help employers avoid suits over workplace violence, reckless misconduct and other business-related problems.

Jason Rosenberg, an attorney with Moran Kiker Brown in Richmond, Va., agreed.

“The downside of not doing it, despite the administrative burden of employment checks, is so much greater,” he said.

Employment screens can be anything from a simple credit check to a more detailed investigative report that requires a background checking service to call former employers.

According to Rosenberg, common types of information included in an employment screening include:

• Credit reports;

• Criminal records;

• Motor vehicle information;

• Drug and alcohol screening;

• Sex offender registry information; and

• Trace on a person’s Social Security number.

Experts emphasize that employers must ensure that they comply with the Fair Credit Reporting Act when performing employment screens and background checks – even if the type of report they request is not credit-related.

According to Rosenberg, “the act applies to all of these things. It’s not difficult to comply with, but if you don’t know you need to comply with it, you don’t stumble into compliance.”

Patton agreed.

“A lot of employers get confused and assume they are not subject to [the act],” he said.

In addition, employers have to make sure they don’t violate federal or state discrimination laws in the process of checking employees’ backgrounds.

Screening Rules

The first thing an employer must do is get consent from a job applicant to perform a background check.

“You have to let the employee or applicant know in writing that you are obtaining a consumer report about them,” Rosenberg said.

While the background check should be mentioned in the employment application, the consent form should be a separate document.

“We won’t lift a finger until the applicant has signed an authorization and been given a stand-alone disclosure form,” said Les Rosen, an attorney and president of Employment Screening Resources in Novato, Calif.

Rosenberg said that the employer must also certify to the consumer reporting agency that the report is not being requested for an “illegal purpose.” Employment screening is considered a “permissible” purpose under the law.

If a more thorough investigative report is being sought, for which the agency interviews others about the person, the applicant must be given written notice no later than three days after the employer has requested such a report. At that point, the applicant has the option to withdraw consent and the employer would be required to stop the process, said Rosenberg.

After obtaining consent, the employer should carefully select a background screening agency to compile the report.

“Make sure you are dealing with a professional firm and not an online ‘do-it-yourself’ service,” recommended Rosen, who has written a number of articles on employment screening. He suggested looking for a service that is a member of the National Association of Professional Background Screeners.

Employers that don’t use a professional service could risk making an employment decision based on public records that haven’t been verified and may not be updated, Friery said.

Rosen and Nadell both said their companies send workers to the relevant courts for information, because it’s not safe to rely on criminal information in online databases.

Adverse Actions

In many cases, an employer obtains a report, but doesn’t take any action against the applicant as a result of that report. However, the Fair Credit Act establishes rules that an employer must follow if it plans to make an adverse employment decision based on a consumer report.

According to Rosenberg, “before you make any adverse employment decision that’s based on a consumer report in whole or in part, you have to let the employee or applicant know you have used an investigative consumer report as the basis for that decision and you have to supply them with a copy of the report and a statement of their rights under [the act].”

The individual has a right to dispute the accuracy of the information contained in the report, and if he or she does so, the third party agency has “an obligation to reinvestigate within 30 days,” Rosen said.

To protect against lawsuits against an employer over the failure to hire as a result of a background check, Patton recommends making it clear that the third party agency is responsible for complying with all state and federal laws.

“The employer can often get the provider to indemnify it for any liability that results from the background check,” he said.

Other Pitfalls to Avoid

In addition to the disclosure and consent requirements for using background checks, employers must make sure they don’t run afoul of state and federal employment laws.

Patton said that the EEOC has voiced its concern that relying on arrest records could have a “disparate impact.”

“You don’t want to gather information about an employee’s age or religion or race, and you don’t want to ask questions about whether the employee refused to work overtime on a Sunday in conducting your background check,” said Patton.

However, these types of questions are unlikely to be a problem because former employers often refuse to provide such detailed information, he noted.

Patton said it’s best to only seek out information that applies to the applicant’s prospective role with the company.

“The nature of the employment background check depends highly on the position you are trying to fill,” he said. For example, “for somebody in an accounting department, you almost always see a full blown background check including a credit check.”

Rosen cautioned to not overreact to negative information.

“If an applicant has a minor criminal record it doesn’t necessarily mean they can’t have the job,” he said.

Nadell agreed.

“Consider the nature and gravity of the offense, the amount of time since it occurred and the job the person has applied for,” he said.

Lawyers say that state restrictions on the type of information that can be a part of a pre-employment screening vary widely.

For example, “a lot of states have laws regulating criminal background checks,” said Patton.

In addition, criminal convictions can be reported “indefinitely” under federal law for the most part, but many states only permit convictions within the seven years prior to the inquiry to be disclosed, Friery said.

Nadell said that the rules can also differ for convictions and arrests, and felonies versus misdemeanors.

Not Too Costly

In many cases, background checks aren’t very expensive and can be done by any business, no matter how small, lawyers say.

“The basics of safe hiring are something any company can handle, and juries [in negligent hiring or retention cases] are not sympathetic to small businesses because they say they don’t have the time or money to do it,” said Rosen.

Nadell said that the cost of a background check can range from $15 to $50. Some reports are available instantly and others may take a couple of days to prepare.

By taking certain actions and asking questions in the interview, employers can – for no additional cost – help avoid hiring “a lawsuit waiting to happen,” said Rosen.

This might include asking whether the applicant has a criminal record or getting an explanation for any “unexplained employment gaps” on the applicant’s resume, Rosen said.

He recommends informing applicants that the company performs background checks, asking if they have any concerns, and informing them the company will call all past employers. He also suggests asking applicants what they think prior employers will say.

One other simple step, said Nadell, is to state in job advertisements, “Background checks required.” This can help employers avoid applicants with troublesome backgrounds.

Questions or comments can be directed to the writer at [email protected].